Disintegration of Trust

Mar 1, 2002

Confidence in Argentina's government, the judiciary, the
currency and the banking system has collapsed. The public
sector, banks, companies and individuals are nearly all
bankrupt. Employment is becoming even scarcer; currently
one-quarter of the labor force has no job. The provision of
public services like health, education and security is
declining. Crime and poverty are spreading.
The government of President Eduardo Duhalde has tried to
soften the impact of the economic disaster by reorganizing the
banking system's balance sheet, rewriting bankruptcy laws,
rationing access to hard currency and imposing windfall taxes
on oil exporters. But all this manic meddling only adds to the
disorder.

"It is one thing to default [and] devalue," says Juan Bosch,
head of asset management for the Compass Group in Argentina,
and quite another "to not respect the rule of law, to violate
property rights and arbitrarily [allocate] losses." He says
that, "Instead of allowing market forces to become the...